The performance of magnetostrictive Terfenol-D is highly dependent on the state of the material and in particular on the mechanical prestress. This paper presents an experimental investigation of the effect of prestress on the dynamic performance of a Terfenol-D transducer. The effects of both prestress and magnetic bias on the near dc transducer performance are also presented. Experimental results demonstrate the sensitivity of the transducer performance in terms of strain, strain rate with applied field, and material properties to relatively small changes in initial mechanical prestress. Trends in material properties, Young's Modulus, magnetomechanical coupling factor, permeability, dynamic strain coefficient, and mechanical quality factor with prestress and drive level are developed. In addition, the effect of magnetic bias and frequency of operation on the strain at different applied fields are examined and shown to significantly influence transducer output at a given prestress level. For the transducer as operated in this study, including the appropriate magnetic bias, both the magnetomechanical coupling and the strain coefficient are optimized with a prestress of 1.0 to 1.25 ksi.